22 May 2007

The end of cheap everything

The rising demand for corn as a source of ethanol-blended fuel is largely to blame for increasing food costs around the world, and Canada is not immune, say industry experts.

Food prices rose 10 per cent in 2006, "driven mainly by surging prices of corn, wheat and soybean oil in the second part of the year," the International Monetary Fund said in a report.

"Looking ahead, rising demand for biofuels will likely cause the prices of corn and soybean oil to rise further," the authors wrote in the report released last month.

Statistics Canada says consumers in the country paid 3.8 per cent more for food in April 2007, compared to the same month last year.

Jyoti Sahasrabudhe, an independent food industry consultant in Calgary, says consumers would be amazed to learn just how much of their food contains corn.

In a recent trip to the grocery story with CBC News, Sahasrabudhe underlined the point.

"For example, in the sushi in the California rolls, we've got hydrolyzed corn protein. Here we are looking at coiled garlic sausage and I believe we will find some modified cornstarch. It's used as a thickener to bind all the ingredients together," said Sahasrabudhe.

"Corn has so many uses throughout the food chain as feed for animals, as an ingredient on its own. I don't know that a relatively inexpensive substitute for all those functions could be found."

The flip side of course is that corn dependency is offering farmers like Alberta's Brett Stimpson a kernel of hope

"We look at it as a business opportunity … prices are strong. And you know we're just going to give it a try," Stimpson told CBC News.

Canada is not alone in feeling the effects of rising corn prices, which rose to over $4 a bushel earlier this year.

Average U.S. grocery bill up by $47A study released in May from Iowa State University shows increased prices for ethanol have already led to bigger grocery bills for the average American — an increase of $47 US compared to July 2006.

In the United States, as elsewhere, ethanol is made from corn. But corn is also used to feed chickens, hogs and cattle, which means a rise in prices for meat, eggs and dairy.

In Mexico last year, corn tortillas, a crucial source of calories for 50 million poor people, doubled in price. The increase forced the government to introduce price controls.

In Canada at least, the fallout from increased production in corn-based ethanol is not likely to lessen any time soon. In its March budget, the federal Conservative government committed $2 billion in incentives for ethanol, made from wheat and corn, and biodiesel.

The move is based in part on wide-spread belief that ethanol-blended fuel produces cleaner emissions than regular gasoline.

But a recent Environment Canada study found no statistical difference between the greenhouse gas emissions of regular unleaded fuel and 10 per cent ethanol-blended fuel.

Environmental groups have argued that producing ethanol — whether from corn, beets, wheat or other crops — takes more energy than is derived from the product.

As cheap, high-quality energy is being consumed as quickly as we can get at it, the inevitable result is that all those sources of not-so-cheap to produce, lower quality energy are going to be tapped for what they're worth. So now (once again as in pre-industrial days), our food system is going to be in direct competition with our energy distribution system for the land required to produce both. The cost of both are going to go up. We're only seeing the beginning of this. All of our quests for more energy are going to have much more visible trade-offs with other aspects of our existence, now that the cheap, condensed stuff has been used up.